Company administrations expected to rise

PricewaterhouseCoopers has recently announced that the number of British businesses entering administration fell in the second quarter of 2011, but, in the same breath, warned that this figure could rise again as consumers continue to avoid the shops and cuts to public spending start to take its toll.

A total of 3,531 British companies became insolvent in the second quarter, representing a 16 per cent drop from the 4,216 recorded for the first, PwC said. This was attributed to low interest rates, lenders keen to avoid realising losses and tax collecting authorities being more lenient, PwC concluded.

The Business Sale Report recently reported that for the second quarter, winding-up petitions rose by 22 per cent on the same period last year, as businesses default on repayments to creditors or fail to meet tax payments to HMRC. The findings support PwC's prediction of increasing insolvencies in the future.

Mike Jervis at PwC said that the economy and firms are “by no means out of the woods yet.”

“There is a high risk of increased insolvencies in the retail, hospitality and leisure sectors over the next 12 months,” he predicted.

Retail takings actually increased 1.5 per cent year-on-year in June, due to, experts said, higher inflation and some retailers starting summer sales earlier than normal.

Several retailers were snagged by the rent due date on 24 June, with a total of 41 – with assets of over £1 million – entering administration around that time.

Upcoming loan and bond repayments are expected to hit larger retailers over the next few years.

Mr Jervis of Lehman Brothers' European business said "The main short-term challenge is low consumer confidence, but the wall of debt that needs refinancing over the next few years is a brewing medium-term challenge."

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